Factors Affecting Profitability Of Selcted Insurance Companies In Ethiopia

Abstract

The main aim of this research was to examine the factors affecting the profitability of selected insurance companies in Ethiopia. Profitability was dependent variable while size, age, leverage, firm growth, liquidity, tangibility of assets, economic growth rate and inflation are independent variables. Explanatory research design and purposive sampling method were employed in this study. The sample in this study includes nine of the listed insurance companies for ten years (2004 -2013). Secondary data obtained from the annual financial statement of selected insurance companies, National Bank of Ethiopia (NBE) and Ministry of Finance and Economic Development (MoFED). The balanced panel data was analyzed by using descriptive, correlation and multiple regression analysis. From the regressions; size, leverage, firm growth, economic growth rate, and inflation are identified as most important determinant factors of profitability hence size and firm growth are positively related. In contrast, leverage, economic growth rate and inflation are negatively but significant impact on profitability. Finally, age, liquidity, and tangibility of assets had insignificant impact on the profitability of insurance companies.